The graph below illustrates three demand curves. -Refer to the graph above to answer this question.Which of the following statements is correct? A)The price elasticity of demand between points A and C on D₃ is 0.267. B)The price elasticity of demand between points A and C on D₃ is 0.375. C)The demand between points A and C on D₃ is elastic. D)The slope of demand curve D₁ and its price elasticity are the same.

Question

Quizplus · Accepted Answer

To calculate price elasticity of demand between two points on a demand curve, we use the following formula: Price elasticity of demand = (Percentage change in quantity demanded / Percentage change in price) Between points A and C on D₃, the percentage change in quantity demanded is (+50 - 30)/[(50+30)/2] * 100 = 33.33% The percentage change in price is (-5 - (-10))/[(-5-(-10))/2] * 100 = 50% Using the formula, we get: = 33.33%/50% = 0.6667 Since this value is greater than 1, we know that demand is elastic. However, since the question only gives us the answer choices in terms of price elasticity, we need to round our answer to the nearest decimal place. Therefore, the correct answer is B) The price elasticity of demand between points A and C on D₃ is 0.375.

The Graph Below Illustrates Three Demand Curves